Response to the following problem:
Shumaker Company manufactures a line of high-top basketball shoes. At the beginning of the year, the following plans for production and costs were revealed:
Pairs of shoes to be produced and sold ..................55,000
Standard cost per unit:
Direct materials ............................................. $15
Direct labor .................................................. 12
Variable overhead .......................................... 6
Fixed overhead ............................................. 3
Total unit cost .............................................. $36
During the year, a total of 50,000 units were produced and sold. The following actual costs were incurred:
Direct materials ........................$775,000
Direct labor ............................ 590,000
Variable overhead .................... 310,000
Fixed overhead ........................ 180,000
There were no beginning or ending inventories of raw materials. In producing the 50,000 units, 63,000 hours were worked, 5 percent more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labor hours.
Required:
1. Using a flexible budget, prepare a performance report comparing expected costs for the actual production with actual costs.
2. Determine the following:
a. Fixed overhead spending and volume variances.
b. Variable overhead spending and efficiency variances.